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Do Market Leaders Lead in Business Process Innovation? The Case(s) of E-Business Adoption

This paper explores the relationship between market position and business process innovation. Prior research has focused on the alignment between new technologies and the internal capabilities of firms to pursue them. I extend the investigation to include external capabilities as well. I develop a framework for predicting whether market leaders will undertake business process innovation based on the complexity of the process, the firm’s organizational structure, and the innovation’s impact on customers. I test its predictions in the context of e-business adoption using a large multi-industry data set. Robust conditional correlations suggest that market leaders were more likely to adopt new e-business practices only in settings that required little customer investment or where customer capabilities were well-aligned with the new technology. Otherwise, leaders’ adoption was significantly lower than that of their less-prominent competitors. The findings highlight the strategic significance of adjustment costs in technology adoption, both within and beyond the firm boundary.